Late last month federal authorities in a healthcare fraud strike force moved to shut down a massive Medicare fraud operation in Miami. Four people were arrested, two of whom were top officials at American Therapeutic Corporation, a leading chain of community mental health centers and charged them with Medicare fraud. It’s alleged the Miami company preyed on patients with severe dementia to bill $200 million for services it never delivered. American Therapeutic Corp is among the nation’s largest chain of community mental health centers licensed by Medicare.

The ATC case is part of an ongoing push by federal officials to crack down on widespread Medicare and Medicaid fraud. Since its inception in 2007, the strike force has indicted more than 825 individuals nationwide. According to Assistant Attorney General Lanny Breuer, the ATC case was the largest fraudulent billing scheme ever prosecuted by the strike force.

These arrests come just one week after an Armenian-American crime group was charged in New York with operating phantom healthcare clinics that tried to cheat the federal program out up to $163 million, which US authorities claimed was the “the largest Medicare fraud scheme ever perpetrated by a single criminal enterprise.”

“Medicare and Medicaid fraud are problems for our country’s health care system”, says attorney and partner Joel Androphy of Berg & Androphy. “Criminal and civil sanctions are necessary.”

In the previous fiscal year, the department of Health and Human Services reported winning and settling over $1.63 billion worth of fraud cases in court. In addition to this fraud money returned, the Health Care Fraud and Abuse Control Program, within the HHS, reported the transfer of $2.51 billion in new funds to the Medicare Trust Fund. A total of 583 defendants were convicted on health care fraud-related charges.

On the whole, $2.576 billion was deposited with the Department of the Treasury and the Centers for Medicare and Medicaid Services. The money was gained through criminal fraud penalties, civil monetary penalties, and gifts and bequests made toward the funds.

The Office of Inspector General excluded a total of 2,556 individuals and entities from the healthcare sphere during the previous year. These were based on criminal convictions for crimes related to Medicare and Medicaid and other healthcare programs, and also expanded to patient abuse or neglect.

This week a Pennsylvania doctor who admitted to over $1 million in false insurance claims submitted to Medicare and private insurers for over 5 years was sentenced to a year in prison. The doctor, John Kristofic, age 62, already paid $3.3 million in retribution to the government following his admission of guilt in January of this year.

Dr. Kristofic was found guilty for submitting false claims for services never rendered between 2003 and 2008. The doctor had been accused of healthcare fraud before, but had never been found guilty by a court until this week’s verdict. Chief U.S. District Judge Donetta Ambrose pointed out that when a doctor such as Kristofic commits healthcare fraud, it’s a national cost and everyone suffers, particularly in today’s tough economic climate. “It’s cheating… It’s stealing.” Ambrose said.

In 1991 Dr. Kristofic had a brush with the law when he was convicted of withholding assets on a federal form. After that incident, he only lost his medical license for a month. Now, it’s likely that the internal medicine specialist never be allowed to practice medicine again.

As harsh as this punishment will be for Kristofic, it’s neither as harsh as it could have been (the maximum sentence for this level of fraud is 3 years) nor undeserved.

The respected Robert Wood Johnson University Hospital is set to pay over $6 million in order to settle allegations of Medicare fraud.

Two federal lawsuits brought against the hospital claim that bills to the hospital’s Medicare patients were fraudulently inflated in order to gain larger payments from the Medicare program. The federal program supplies supplemental reimbursements, known as “outlier payments,” to health care institutions when the cost of care is unusually high. Robert Wood Johnson University Hospital is accused of inflating costs in order to gain access to these outlier payments, which were created as a protection to health care providers who might be giving care to patients with extraordinary conditions.

Both federal lawsuits were brought under Qui Tam provisions of the False Claims Act. The whistle blowers will receive just over $1.1 million in compensation for reporting the alleged fraud.

To date, with the help of whistle blowers, the Justice Department has been able to regain nearly $1.1 billion in outlier payment fraud.

A pilot program run by Medicare in three states (California, New York and Texas) claimed $900 million in fraudulently claimed money in the last three years. The program focused on regaining taxpayer money that had been paid out to hospitals and doctors based on fraudulent or overcharged bills.

This week, President Obama announced the expansion of the program to a Federal level. Auditors, known around the White House as “bounty hunters” have been deployed around the nation to identify and investigate fraudulent Medicare and Medicaid charges.

Auditors will receive a small percentage of the regained money as an incentive to finding improper payments. “It’s estimated that improper payments cost taxpayers almost $100 billion last year alone,” President Obama said on Wednesday, “If we created a Department of Improper Payments, it would actually be one of the biggest departments in our government.”

The program works by empowering auditors to use state of the art computer programs that troll through records to identify fraudulent claims. Auditors then use more traditional means to track and investigate suspicious claims.

False Claims Act cases involving treatment issues are one of the types of fraudulent billing healthcare qui tam cases. There are five potential areas in which qui tam cases arise in the area of treatments for which Medicare or Medicaid claims are submitted.

1. Total Neglect or No Services Provided.
The most obvious case of FCA liability imposed on a physician for fraudulent billing occurs when he submits claims for services that were not provided. For example, a doctor submits reimbursement claims to Medicare for surgeries he never performed.

2. Worthless Services.
A healthcare provider may also be liable for submitting claims for services rendered if the services are so deficient that there was no medical value. For example, if in providing a multitude of services, a nursing home failed to properly feed a patient resulting in an overall deterioration of health, serious illness, or death, a court could find the value of all services to be worthless.

3. Inadequate Services.
Many reported schemes involving inadequate care occur when a facility—that is paid on a per diem basis by the Government—provides inadequate tests or services. For example, Medicare may pay a nursing home facility per diem for each patient regardless of the services provided. By ordering fewer tests, using fewer supplies, employing less staff and reducing referrals to specialists, the nursing home facility is providing inadequate services to increase its profits. These tactics violate the Nursing Home Reform Act, the Social Security Act, and Medicare/Medicaid laws. When a the nursing home is paid on a per diem basis for each Medicare patient, the nursing home implicitly agrees to follow the standards of care in the Medicare and Medicaid statutes, and to provide adequate care in a manner that maintains or enhances of the quality of life of its residents. If the nursing home provides inadequate care and submits a reimbursement claim for its residents, the nursing home is submitting a false claim in violation of the FCA.

4. Standard of Care.
Statutes and regulations governing Medicare, Medicaid, Social Security programs, as well as nursing homes, require healthcare providers to meet quality of care standards. If a provider fails to meet these standards, then such failure may result in exclusion from the program, as well as substantial monetary damages. A provider may fall short of these standards when patients are subjected to unreasonable risks due to a provider’s failure to take proper preventative measures. For example, a long-term psychiatric facility’s failure to prevent patients from being subjected to a risk of physical and mental harm may expose the facility to FCA liability, because it failed to meet the adequate standard of care.

5. Aggressive Treatment.
Aggressive patient treatment usually results when a physician orders unnecessary medical tests and provides unnecessary medical services. A provider can dramatically increase its profits for multiple procedures if it is reimbursed for each unnecessary test or service rendered, rather than being paid per-diem.

The Department of Justice (DOJ) and the Department of Health and Human Services (HHS) are working together to prevent, detect, and prosecute health care fraud. At the National Health Care Fraud Summit held on January 28, 2010, HHS Secretary Kathleen Sebelius and Attorney General Eric Holder discussed, among other things, the accomplishments of the Health Care Fraud Prevention and Enforcement Action Team (HEAT)—an initiative created in May 2009 by the DOJ and HHS.  The HEAT has increased the number of Medicare Fraud Strike Forces, which now operate in seven major cities across the country:  (1) Baton Rouge, Louisiana; (2) Brooklyn, New York; (3) Detroit, Michigan; (4) Houston, Texas; (5) Los Angeles, California; (6) Miami, Florida; and (7) Tampa, Florida.  Since the first Strike Force began operations in Miami, Florida in 2007, Strike Force teams have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program in excess of $1 billion dollars.

On February 1, 2010, President Obama unveiled the 2011 fiscal year budget.  This budget allocates $1.7 billion for efforts to combat health care fraud.  This is an increase of $250 million over the 2010 enacted level.   This increased support will, among other things, expand the HEAT and implement a set of proposals to strengthen Medicare, Medicaid, and the Children’s Health Insurance Program.  The ultimate goal is to prevent health care fraud before it occurs, detect it as early as possible when it does occur, and vigorously enforce all penalties and recourses available when fraud is identified.